Identifying ambiguity shocks in business cycle models using survey data

Jaroslav Borovička

No 1615, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: We develop a macroeconomic framework with agents facing time-varying concerns for model misspecification. These concerns lead agents to interpret the economy through the lens of a pessimistically biased `worst-case' model. We use survey data to identify exogenous fluctuations in the worst-case model. In an estimated New-Keynesian business cycle model with frictional labor markets, these ambiguity shocks explain a substantial portion of the variation in labor market quantities.

Date: 2016
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (13)

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Working Paper: Identifying Ambiguity Shocks in Business Cycle Models Using Survey Data (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:1615

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